How IKEA Manages to Keep Its Prices Low? | IKEA Low-Cost Strategy

Diksha Sinha Diksha Sinha
Mar 10, 2022 5 min read
How IKEA Manages to Keep Its Prices Low? | IKEA Low-Cost Strategy

Thinking about renovating your home? Isn't IKEA the first name that pops up in your head when you think about shopping for furniture?

In recent times, IKEA has become the go-to option for young and old alike to shop for good quality, durable and affordable home dΓ©cor pieces. 'Affordable' is the keyword here.

Have you ever thought, how has IKEA been able to lower the costs of its products The brand has made a niche for itself in selling high-end beds, sofas, dining sets and wardrobes at half the price of its competitors, but how does it manage the same?. Well, here's your answer.

There are quite a few methods that IKEA follows to keep its prices low while maintaining the quality of its products. Let's take a look at these methods.

A Reverse Design Process
IKEA's Flat Packaging Innovation
Bulk Production
Unique Construction Technique
IKEA's Self Help Stores
Take it home Policy
A Pioneer In Do it Yourself

A Reverse Design Process

IKEA first decides on the price range for a particular product before starting to design the same. Where almost all competitor brands go by the book and follow the conventional process of choosing a design theme, making a storyboard, procuring the materials, putting together the design and then pricing the item according to the cost incurred, IKEA does the exact opposite.

IKEA's Flat Packaging Innovation

IKEA's founder, Ingvar Kamprad, introduced a new selling system in the year 1956, which he termed 'flat-packaging'. This flat-packing selling technique has now become IKEA's identity. So, what exactly is flat-packaging? It is a selling system where IKEA sells parts of furniture instead of selling the whole product together.

This allows the products to be packed in flat pieces, facilitating easier transport to stores. It also gives customers the option of choosing customized pieces for their use according to their convenience. Thus, IKEA manages to maintain the low price of its products. Β 

IKEA Flat Packaging
IKEA Flat Packaging

Bulk Production

IKEA produces all their furniture in bulk. This is something that they have agreed to time and again. Be it dining tables, chairs, sofas, wardrobes, beds, showcase or anything else, they produce a good number of all designs. Therefore, they are offered discounts on the bulk purchase of raw material as well as making costs. This is how the bulk production method allows IKEA to maintain a low price strategy.

Unique Construction Technique

If you ever have the time to go through IKEA's website, you will come to a part that describes their construction methods. They are always innovating new techniques and methods to maintain their low selling price while making sure that their customers have no complaints about the quality of the products.

On the website, it is explained how IKEA uses the technique of constructing their furniture by layering sheets of wood over a honeycomb base structure. Since the honeycomb core requires less wood, it costs less money for production. Thus, IKEA is able to maintain a low cost of products without compromising on quality.

IKEA's Self Help Stores

IKEA believes in promoting independent shopping. What is independent shopping? It is nothing but allowing customers to shop on their own. Thus, IKEA does not hire a lot of store staff. This helps them to cut costs towards wages and provide customers with lesser priced products.

IKEA Store
IKEA Store

In order to allow customers to shop independently, they also print all the product details, cautions, installation processes, etc. on the price tags. Hence, customers can easily read the guidelines on the price tag and choose the furniture they want to buy without any external help.

Take it home Policy

IKEA has a policy where the customers can carry their buys home by themselves on the same day. Although, it is a tad bit inconvenient this policy does come with its own set of contributions towards the low price strategy.

IKEA Take it Home Today Policy
IKEA Take it Home Today Policy

Since customers can carry their own products, they do not need to pay the delivery charges to IKEA or pay higher product prices that may be used to facilitate free delivery. This reduces a lot of overhead costs on the making charges.

A Pioneer In Do it Yourself

If you have ever shopped at IKEA, you know pretty well that you must be adept at assembling and installing the furniture yourself. The company promotes a DIY environment, where it allows customers to install their own furniture. The DIY model of IKEA stands for Do it yourself.

IKEA Do It Yourself
IKEA Do It Yourself

They provide guidebooks and assembly charts to support customers in installing their own furniture. Thus, the company does not need to pay any extra charges to internal or external teams for installation, thereby, maintaining their low price.

In the recent past IKEA has understood that the DIY method can become a hassle for some customers, so, they acquired TaskRabbit, an external furniture installation support company. Therefore, customers have the option of hiring executives at TaskRabbit for assembling their furniture at lower costs.

IKEA TaskRabbit
IKEA TaskRabbit

Conclusion

With so many unique features and methods, IKEA has become a front-running strategist in keeping its product pricing low and maintaining its position in the market. The innovation applied in every aspect of the business makes sure that IKEA keeps giving a tough challenge to their competitors in the market, holding the top position when it comes to being one of the best furniture-selling businesses in the world. Now you know where to go the next time you want to furnish your home.

FAQ

Why is IKEA so cheap?

IKEA employs flat packaging, DIY model, and self-help stores which help the brand to keep its prices low and competitive while not compromising on the quality.

What does the DIY model of IKEA stand for?

The DIY model of IKEA stands for Do It Yourself, where it ships the product in flat packaging and the customer has to assemble the furniture by themselves which is one of the major reasons how it manages to keep costs low for consumers.

Is IKEA cheap in India?

IKEA to boost affordability in India has priced Out of the 7,500 products that it sells about 1,000 are priced less than Rs 200 and 500 cost under Rs 100.

Does IKEA sell online in India?

Yes, IKEA does sell online in India.

What does the word IKEA stand for?

IKEA stands for Ingvar Kamprad Elmtaryd Agunnaryd.

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